Society of Lloyds v. Siemon-Netto, G. , 457 F.3d 94 ( 2006 )

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued October 28, 2005 Decided August 8, 2006
No. 04-7214
SOCIETY OF LLOYD’S,
APPELLEE
v.
GILLIAN MARY SIEMON-NETTO AND
UWE SIEMON-NETTO,
APPELLANTS
Appeal from the United States District Court
for the District of Columbia
(No. 03cv01524)
Russel H. Beatie argued the cause and filed the briefs for
appellants.
Stephen J. Jorden argued the cause and filed the brief for
appellee.
Before: SENTELLE and GARLAND, Circuit Judges, and
WILLIAMS, Senior Circuit Judge.
Opinion for the court filed by Circuit Judge GARLAND.
GARLAND, Circuit Judge: Defendants Gillian and Uwe
Siemon-Netto are two among the hundreds of “Names” whom
2
the Society of Lloyd’s has sued for nonpayment of reinsurance
premiums. The English High Court of Justice, Queen’s Bench
Division, entered money judgments in favor of Lloyd’s against
the Siemon-Nettos. Lloyd’s then sued to enforce those
judgments in the United States District Court for the District of
Columbia. The district court granted summary judgment in
favor of Lloyd’s, and we now affirm.
I
Eight circuit courts have set forth the background
information that is relevant to this appeal.1 Seeing no need to
reinvent the wheel, we take our description of the context of this
litigation from the Fifth Circuit’s clear explications in Society of
Lloyd’s v. Turner, 303 F.3d 325 (5th Cir. 2002), and
Haynsworth v. The Corporation, 121 F.3d 956 (5th Cir. 1997).
See also Society of Lloyd’s v. Reinhart, 402 F.3d 982, 988 (10th
Cir. 2005) (“Numerous courts have summarized the basic facts
applicable to the underlying litigation, and these facts are not in
dispute.”).
A
The Parliament of the United Kingdom authorized the
Society of Lloyd’s to regulate a London insurance market
through a series of Parliamentary Acts, known as the “Lloyd’s
1
See Society of Lloyd’s v. Reinhart, 402 F.3d 982 (10th Cir.
2005); Lipcon v. Underwriters at Lloyd’s, 148 F.3d 1285 (11th Cir.
1998); Richards v. Lloyd’s of London, 135 F.3d 1289 (9th Cir. 1998);
Haynsworth v. The Corporation, 121 F.3d 956 (5th Cir. 1997); Allen
v. Lloyd’s of London, 94 F.3d 923 (4th Cir. 1996); Shell v. R.W.
Sturge, Ltd., 55 F.3d 1227 (6th Cir. 1995); Bonny v. Soc’y of Lloyd’s,
3 F.3d 156 (7th Cir. 1993); Roby v. Corp. of Lloyd’s, 996 F.2d 1353(2d Cir. 1993).
3
Acts,” passed between 1871 and 1982. In Haynsworth, the Fifth
Circuit explained the structure of the Lloyd’s market as follows:
Lloyd’s is a 300-year-old market in which
individual and corporate underwriters known as
“Names” underwrite insurance. The Corporation of
Lloyd’s, which is also known as the Society of
Lloyd’s, provides the building and personnel necessary
to the market’s administrative operations. The
Corporation is run by the Council of Lloyd’s, which
promulgates “Byelaws,” regulates the market, and
generally controls Lloyd’s administrative functions.
Lloyd’s does not underwrite insurance; the Names
do so by forming groups known as syndicates. Within
each syndicate, participating Names underwrite for
their own accounts and at their own risk. . . . Each
syndicate is managed and operated by a Managing
Agent, who owes the Names a contractual duty to
conduct the syndicate’s affairs with reasonable care. .
..
Names must become members of Lloyd’s in order
to participate in the market. Prospective members are
solicited and assisted in the process of joining by
Member’s Agents, whose duties to the Names are
fiduciary in nature. Names must pass a means test to
ensure their ability to meet their underwriting
obligations, post security (typically, a letter of credit),
and personally appear in London before a
representative of the Council of Lloyd’s to
acknowledge their awareness of the various risks and
requirements of membership, and in particular the fact
that underwriting in the Lloyd’s market subjects them
to unlimited personal liability.
4
Participation in the market also requires the
execution of a number of contracts and agreements, the
most important of which is the General Undertaking,
the standardized contract between Lloyd’s and the
individual Names. Names additionally must enter into
a Member’s Agent’s agreement, the contract that
defines the relationship between the Name and his
chosen Member’s Agent, and one or more Managing
Agent’s agreements, which define the relationships
between the Name and the Managing Agents of the
syndicates he wishes to join. Under the present version
of Lloyd’s Byelaws, each of these agreements must
contain clauses designating England as the forum in
which disputes are to be resolved and choosing English
law as the law governing such disputes.
Haynsworth, 121 F.3d at 958-59.
The Turner court described the insurance crisis that led to
lawsuits like the one now before us:
In the late 1980s and early 1990s, Lloyd’s
underwriters incurred billions of dollars of losses, due
in large part to toxic tort cases. Because of the
enormity of the outstanding liabilities and because of
the Names’ inability to satisfy their underwriting
obligations, the very existence of Lloyd’s was
threatened. To ensure both the survival of the market
and the payment of policyholders’ claims, as well as to
protect the Names, Lloyd’s devised the Reconstruction
and Renewal (R&R) plan, which provided reinsurance
for all the Names’ pre-1993 liabilities from an
independent company, Equitas Reinsurance Ltd.
(“Equitas”). Equitas was funded, in part, by the
reinsurance premiums paid by the Names.
5
....
According to Lloyd’s, 95% of the Names accepted
the offer and paid the reinsurance premium.[2] The
remaining 5% . . . refused to accept the offer and
refused to pay. As Lloyd’s was contractually
authorized to do, Lloyd’s appointed a substitute agent
for the non-accepting Names. The substitute agent
signed and accepted the Equitas reinsurance contract
on behalf of the resistant Names.
Turner, 303 F.3d at 327-28.
The Turner court further explained the genesis of the
referenced “contractual[] authoriz[ation]” that permitted Lloyd’s
to appoint a substitute agent for the recalcitrant Names:
All Names signed a General Undertaking in which
they agreed to “comply with the provisions of Lloyd’s
Acts 1871-1982, any subordinate legislation made
thereunder, [and any] requirement made or imposed by
the Council [of Lloyd’s].” Pursuant to Lloyd’s Acts
1982, Schedule 2, § (18)(b), Lloyd’s obtained the
power to appoint substitute agents when the Council
deemed it necessary. Through a series of bylaws and
resolutions under this Act, the Council was authorized
to appoint a substitute agent on behalf of Names
specifically “to execute the Reinsurance Contract for
itself and on behalf of the Members in such form as the
2
As the Seventh Circuit explained, “Lloyd’s levied an assessment
(the reinsurance premium) against all the names [and then] offered a
discount on the assessment to induce the names to go along with this
plan voluntarily.” Society of Lloyd’s v. Ashenden, 233 F.3d 473, 478
(7th Cir. 2000).
6
council may direct . . . .” Lloyd’s Byelaw No. 20 of
1983; Byelaw No. 82 of 1995; AUA9 Resolution of
1996.
Turner, 303 F.3d at 328 n.3.
Finally, the Fifth Circuit described the English litigation
against the recalcitrant Names, upon which the English
judgments in this case are ultimately founded:
Lloyd’s paid the Equitas premiums for those
Names, and Equitas assigned its right to collect the
premiums to Lloyd’s. In late 1996, Lloyd’s brought
collection proceedings in England against the
recalcitrant Names . . . .
The lengthy litigation that followed in England
took place in a series of test cases. First, the English
courts tried the Leighs case, [Society of Lloyd’s v.
Leighs, [1997] C.L.C. 759 (Q.B.)], to determine
whether Lloyd’s was entitled to appoint substitute
agents to bind the non-settling Names to the R&R Plan,
to enforce the Equitas contact, and to collect the
premiums. The court found for Lloyd’s, but allowed
the plaintiffs to pursue their claims of fraudulent
inducement against Lloyd’s in a separate action. The
English Court of Appeal upheld the trial court’s
decision, [see Society of Lloyd’s v. Leighs, [1997]
EWCA (Civ) 2283], and leave to appeal was denied by
the Judicial Committee of the House of Lords, the
English equivalent of the United States Supreme Court.
The Names’ claims for fraud were brought all
together in the Jaffray action, [Society of Lloyd’s v.
7
Jaffray, [2000] EWHC (Comm) 51], . . . [in which] the
English courts found in favor of Lloyd’s . . . .
. . . Lloyd’s sought summary judgment against the
Names for the Equitas premium amount in the Fraser
litigation. In this litigation, the Names challenged
Lloyd’s calculation of the reinsurance premium . . . .
After lengthy review, the trial court ruled against the
Names on this claim, and the English Court of Appeal
denied leave to appeal. [See Society of Lloyd’s v.
Fraser, [1998] EWCA (Civ) 1378.]
Turner, 303 F.3d at 328-29.
B
This brings us to the present litigation. Gillian and Uwe
Siemon-Netto were among the Names who neither accepted
their settlement offers nor paid the reinsurance premium for
their outstanding underwriting liabilities. Nor did they take the
opportunity afforded by the English courts to pursue separate
fraud claims against Lloyd’s. See Society of Lloyd’s v. Siemon-
Netto, No. 03-1524, Mem. Op. at 3 (D.D.C. Aug. 20, 2004).
On March 24, 1997, Lloyd’s sued the Siemon-Nettos in
England for breach of their contractual obligations to pay the
reinsurance premiums. The Siemon-Nettos’ counsel entered an
appearance on their behalf. The English courts granted
summary judgment against the Siemon-Nettos in the Fraser
case, see Society of Lloyd’s v. Fraser, [1998] EWCA (Civ)
1378, and on December 21, 1998, entered individual money
judgments against Gillian Siemon-Netto for ^280,055.72 and
against Uwe Siemon-Netto for ^87,109.97, see Society of
Lloyd’s v. Gillian Mary Siemon-Netto, Judgment (J.A. 116);
Society of Lloyd’s v. Uwe Siemon-Netto, Judgment (J.A. 119).
8
On July 15, 2003, Lloyd’s filed suit against the Siemon-
Nettos in the United States District Court for the District of
Columbia, seeking recognition and enforcement of the English
judgments under the District’s Uniform Foreign Money
Judgments Recognition Act of 1995 (“Recognition Act”), D.C.
Code § 15-381 et seq. Venue was based on the Siemon-Nettos’
status as District residents and jurisdiction on diversity of
citizenship. See Compl. ¶¶ 6, 7. The Siemon-Nettos answered
Lloyd’s complaint and asserted a number of affirmative defenses
and counterclaims. Lloyd’s filed motions to strike the
affirmative defenses under Federal Rule of Civil Procedure 12(f)
and to dismiss the counterclaims pursuant to Rule 12(b).
The district court granted Lloyd’s motions to strike and to
dismiss. See Society of Lloyd’s v. Siemon-Netto, No. 03-1524,
Order at 1 (D.D.C. Aug. 20, 2004). Lloyd’s then moved for
summary judgment on its claims for recognition and
enforcement of the English judgments, which the district court
granted. See Society of Lloyd’s v. Siemon-Netto, No. 03-1524,
Order at 1 (D.D.C. Oct. 28, 2004). The Siemon-Nettos noted a
timely appeal.
We consider the Siemon-Nettos’ affirmative defenses in
Part II and their counterclaims in Part III. Because the district
court struck the former and dismissed the latter solely on
grounds of legal insufficiency, we review those decisions de
novo. See Singletary v. District of Columbia, 351 F.3d 519, 523
(D.C. Cir. 2003); Fund for Animals, Inc. v. Norton, 322 F.3d
728, 732 (D.C. Cir. 2003). The defendants “concede that
without their affirmative defenses and counterclaims there
[would be] no genuine issues of material fact,” and that in such
event summary judgment would be appropriate. Appellants’ Br.
28.
9
II
Section 15-382 of the Recognition Act provides, in
pertinent part, that “[e]xcept as provided in section 15-383,” a
“foreign-money judgment is enforceable in the same manner as
the judgment of a sister jurisdiction which is entitled to full faith
and credit.” D.C. Code § 15-382.3 Section 15-383 contains a
list of specific exceptions, only one of which the Siemon-Nettos
claim here:
A foreign-money judgment need not be recognized if:
. . . (3) [t]he cause of action on which the judgment is
based is repugnant to the public policy of the District
of Columbia.
D.C. Code § 15-383(b)(3). Concluding that none of the Siemon-
Nettos’ four affirmative defenses came within that exception,
the district court struck them all as legally insufficient to bar
enforcement of the English judgments. We consider the first
defense in subpart A, and the remaining defenses in subpart B.
A
As their first affirmative defense, the Siemon-Nettos’
contend that “the foreign-money judgment[s] obtained by
Lloyd’s in the courts of the United Kingdom [are] repugnant to
the public policy of the District of Columbia and should not be
recognized because the cause of action on which [they were]
3
The Recognition Act is based on the Uniform Foreign Money-
Judgments Recognition Act. See UNIF. FOREIGN MONEY-JUDGMENTS
RECOGNITION ACT, 13 U.L.A. 261 (1991). The alert reader will note
that, for no apparent reason, different authorities cited in this opinion
insert a hyphen at different places (or not at all) within the phrase
“foreign money judgments.”
10
based conflicts with the public policy of the District of
Columbia.” Am. Answer ¶ 69. The defendants list three
grounds for finding repugnancy: (1) “a contract cannot be
enforced against the party who did not knowingly assent to its
terms”; (2) “the legislation on which the foreign cause of action
was based (Lloyd’s Act 1982) and [the] Reconstruction and
Renewal Byelaw were unenforceable and voidable as a result of
Lloyd’s failure to satisfy the conditions imposed on it by the
Parliament in exchange for the legislation”; and (3) “the Lloyd’s
Act 1982 constituted an unlawful delegation of legislative and
governmental power to Lloyd’s, a private business entity.” Id.
1. As their first ground, the defendants contend that the
English judgments are repugnant to District public policy
because they enforce a contract to which they did not assent.
The contract at issue, they argue, is the Equitas reinsurance
contract. That contract was not signed by them, but rather by
the substitute agent appointed by Lloyd’s to negotiate and sign
for all Names who rejected the Reconstruction and Renewal
(R&R) Plan. Recognition of such a contract, they insist, is
repugnant to the general contract law principle that a contract
requires mutual assent.
Section 15-383(b)(3) of the Recognition Act permits
nonrecognition of a foreign judgment only if “the cause of
action on which [it] is based” is repugnant to public policy.
D.C. Code § 15-383(b)(3) (emphasis added). A cause of action
is the legal authority (here, English contract law) that permits a
court to provide redress for a particular kind of claim (here,
Lloyd’s contention that the defendants breached their
obligations to pay the reinsurance premiums). See Trudeau v.
FTC, No. 05-5363, slip op. at 18 n.15 (D.C. Cir. July 28, 2006).
Accordingly, the dispositive question is whether the core
principles of English contract law are repugnant to the public
11
policy of the District of Columbia, not whether any particular
application of that cause of action is repugnant.4
That question is easily answered. As the district court
noted, the Siemon-Nettos “have not suggested that English
contract law principles differ substantively from those in the
District of Columbia.” Mem. Op. at 7 (Aug. 20, 2004). Indeed,
District of Columbia contract law, like American contract law
in general, is historically derived from (and similar to) the
English common law of contract.5 That being the case, it would
be hard to regard the latter as repugnant to the former, and no
federal court has done so. See Reinhart, 402 F.3d at 995(holding that an English “breach of contract action” is not
“repugnant to New Mexico public policy”); Turner, 303 F.3d at
333 (holding the same with respect to Texas public policy).
4
See Reinhart, 402 F.3d at 995 (“reiterat[ing] that we must focus
on the ‘cause of action’ and the ‘claim for relief’ underlying the
English Judgment, not the differences in the bodies of law, because
slight differences between England’s and New Mexico’s laws do not
trigger the public policy exception”); Turner, 303 F.3d at 332 (noting
that the Texas Recognition Act “does not refer to the judgment itself,
but specifically to the ‘cause of action on which the judgment is
based,’” and thus that “the fact that a judgment offends Texas public
policy does not, in and of itself, permit” refusal of recognition).
5
See, e.g., Williams v. Walker-Thomas Furniture Co., 350 F.2d
445, 450 n.7 (D.C. Cir. 1965) (citing English common law in
concluding that unconscionable contracts are unenforceable under
District of Columbia law); 1 E. ALLAN FARNSWORTH, FARNSWORTH
ON CONTRACTS §§ 1.5-1.7 (3d ed. 2004) (describing the development
of American contract law from its English common law roots); see
also North Am. Graphite Corp. v. Allan, 184 F.2d 387, 389 n.1 (D.C.
Cir. 1950); Meyer v. Washington Times Co., 76 F.2d 988, 992 (D.C.
Cir. 1935).
12
The defendants do not suggest, for example, that English
contract law principles permit parties to be bound to a contract
without their consent. Rather, they contend only that this is the
“practical effect” of the English judgments holding them
responsible for a reinsurance contract they refused to sign.
Appellant’s Br. 18. But even if we were to consider repugnancy
on such an “as applied” basis, we still could not find the
judgments repugnant to public policy, because the English court
did not bind the Siemon-Nettos to a contract to which they did
not assent. To the contrary, it held them to a contract to which
they did assent: the General Undertaking.
When the Siemon-Nettos became Names, they (not their
agents) personally signed a “standardized contract between
Lloyd’s and the individual Names” known as the General
Undertaking. Haynsworth, 121 F.3d at 959; see J.A. 25-26
(showing the signature of Gillian Siemon-Netto on a copy of the
General Undertaking dated Sept. 9, 1986); J.A. 28-29 (showing
the signature of Uwe Siemon-Netto on a copy of the General
Undertaking dated Jan. 1, 1988). Under the General
Undertaking, the Siemon-Nettos agreed to be bound by the
Lloyd’s Acts 1871-1982, as well as by current and future
Lloyd’s Byelaws. See General Undertaking ¶ 1; Oral Arg. Tr.
at 11-12. The Lloyd’s Act 1982 specifically authorized Lloyd’s
to make Byelaws for the purpose of appointing substitute agents
to bind Names, see Lloyd’s Act, 1982, Sched. 2, § 18(b), and
such a “Substitute Agents Byelaw” was in existence when the
defendants signed the General Undertaking, see J.A. 32-33.
Thereafter, Lloyd’s issued another series of Byelaws that
authorized the appointment of “substitute agent[s] on behalf of
Names specifically ‘to execute the Reinsurance Contract for
itself and on behalf of the Members.’” Turner, 303 F.3d at 328
n.3 (citing Lloyd’s Byelaw No. 20 of 1983; Byelaw No. 82 of
1995; AUA9 Resolution of 1996).
13
It was no doubt risky for the defendants to agree to be
bound by future Byelaws in this way. But the General
Undertaking was no contract of adhesion. The Siemon-Nettos
were investors who qualified for status as Lloyd’s Names under
a set of stringent criteria, and who presumably thought the
upside potential was worth the downside risk (including the
express risk of unlimited personal liability6). Regardless of
whether we would reach the same disposition under District of
Columbia contract law, we cannot say that the English courts’
decision to bind the defendants under these circumstances is
repugnant to the public policy of this jurisdiction.7
The defendants press upon us the case of Matusevitch v.
Telnikoff, 877 F. Supp. 1 (D.D.C. 1995), aff’d, No. 97-7138,
6
To be more precise: “Names bear unlimited liability for their
proportionate losses in each syndicate they join. Their liability is
several, not joint; no Name is ever responsible for the losses of those
fellow Names who comprise the syndicate.” Roby, 996 F.2d at 1357.
7
See Siemon-Netto, Mem. Op. at 13 (Aug. 20, 2004) (“Unequal
bargaining power is not a factor in a case like this one, where the
Siemon-Nettos, as investors, had the free choice to become Names or
not.”); see also Reinhart, 402 F.3d at 996-97 (holding that binding the
Names to the Equitas reinsurance contract did not violate New Mexico
public policy because (inter alia) the Names were “highly
sophisticated investor[s] who had to pass a ‘means’ test,” the Equitas
contract “was the implementation of specific provisions to address the
unlimited liability undertaken by all Names pursuant to the General
Undertaking Agreement’s broad powers,” and the Names were “not
in a weaker bargaining position nor did Lloyd’s compel [their]
investment”); cf. Ashenden, 233 F.3d at 480-81 (ruling that “the
English court[’s] holding that Lloyd’s was authorized by its contract
with the names to appoint agents to negotiate a contract that would
bind the names without the names’ consent. . . . is not so unreasonable
that it could be thought a denial of international due process even if
international due process had a substantive component”).
14
1998 WL 388800 (D.C. Cir. May 5, 1998), in which a district
court declined to recognize an English libel judgment on the
ground that enforcement would be repugnant to the public
policy of the State of Maryland and of the United States. 877 F.
Supp. at 4. But in Matusevitch, unlike this case, the district
court noted substantial differences between a cause of action for
libel in England and in the United States, including differences
in both substantive law and burdens of proof. Id. at 4-6. Indeed,
the subsequent history of that case, which neither the Siemon-
Nettos nor Lloyd’s mention, only sharpens the point. On appeal,
this Court certified to the Maryland Court of Appeals the
question of whether enforcement of the English judgment would
be repugnant to the public policy of Maryland. See Matusevitch,
1998 WL 388800, at *1. We then affirmed the district court’s
judgment after receiving the following answer:
A comparison of English and present Maryland
defamation law does not simply disclose a difference
in one or two legal principles. Instead, present
Maryland defamation law is totally different from
English defamation law in virtually every significant
respect. Moreover, the differences are rooted in
historic and fundamental public policy differences
concerning freedom of the press and speech.
Telnikoff v. Matusevitch, 702 A.2d 230, 248 (Md. 1997)
(internal citations omitted); see Matusevitch, 1998 WL 388800,
at *1. The defendants have noted no similarly substantial
differences between England and the District of Columbia with
respect to the law of contract.8
8
Among the differences found by the Maryland court were that,
in contrast to Maryland law, under English law: “it is unnecessary for
the plaintiff to establish fault, either in the form of conscious
wrongdoing or negligence”; “defamatory statements are presumed to
15
2. The defendants’ second ground for claiming that the
English judgments are repugnant to District policy begins with
their contention that the legislation (the Lloyd’s Act 1982) that
permitted Lloyd’s to promulgate Byelaws -- particularly the
Byelaws that authorized Lloyd’s to appoint substitute agents to
execute the reinsurance contract on behalf of the Names -- also
imposed certain conditions on Lloyd’s (i.e., the provision of
better quality information to Names about the status of the
Lloyd’s market). See Am. Answer ¶¶ 40-43. The defendants
argue that, because Lloyd’s assertedly failed to satisfy those
conditions, the Byelaws passed pursuant to that legislation
“were unenforceable and voidable.” Id. ¶ 69.
But the question of whether the Lloyd’s Byelaws were valid
under English law is itself a question of English -- not District
of Columbia -- law. And it is a question that the English courts
have already answered, concluding that the pertinent Byelaws
are indeed valid. See Society of Lloyd’s v. Leighs, [1997] C.L.C.
759 (Q.B.). We cannot reconsider that decision here. See
Medellin v. Dretke, 544 U.S. 660, 670 (2005) (“[W]here ‘comity
of this nation’ calls for recognition of a judgment rendered
abroad, ‘the merits of the case should not . . . be tried afresh . .
. upon the mere assertion . . . that the judgment was erroneous in
law or in fact.’” (quoting Hilton v. Guyot, 159 U.S. 113, 202-03
(1895)). Certainly the defendants have pointed to nothing about
be false unless a defendant proves them to be true”; “a qualified
privilege can be overcome without establishing that the defendant
actually knew that the publication was false or acted with reckless
disregard”; a statement is presumed to be “one of fact, and the burden
is on the defendant to prove ‘fair comment’”; and there is “no special
protection for defamation actions arising from critiques of public
figures or public officials, [or] involving what American courts would
characterize as core political discourse.” Telnikoff, 702 A.2d at 247-
48.
16
the principles applied by the English courts in reaching that
decision that would render repugnant the contractual cause of
action on which Lloyd’s judgments are based.
3. The third ground advanced by the defendants is their
claim that “the Lloyd’s Act 1982 [itself] constituted an unlawful
delegation of legislative and governmental power to Lloyd’s, a
private business entity.” Am. Answer ¶ 69. But whether the
Lloyd’s Act constituted an “unlawful delegation” under English
law is again a question that only the English courts can answer;
in fact, it is a question that the act of state doctrine bars us from
even asking. See World Wide Minerals, Ltd. v. Republic of
Kazakhstan, 296 F.3d 1154, 1164 (D.C. Cir. 2002) (noting that
the “act of state doctrine ‘precludes the courts of this country
from inquiring into the validity of the public acts a recognized
foreign sovereign power committed within its own territory’”
(quoting Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398,
401 (1964)).9 Moreover, there is once again nothing in the
defendants’ argument to support the only ground the defendants
advance for nonrecognition of Lloyd’s English judgments: that
9
As we have further explained:
The act of state doctrine . . . . is applicable when “the relief
sought or the defense interposed would [require] a court in
the United States to declare invalid the official act of a
foreign sovereign performed within” its boundaries. W.S.
Kirkpatrick & Co., Inc. v. Envtl. Tectonics Corp., 493 U.S.
400, 405 (1990). When it does apply, the doctrine serves as
“‘a rule of decision for the courts of this country,’” id.(quoting Ricaud v. Am. Metal Co., 246 U.S. 304, 310
(1918)), which requires that, “in the process of deciding [a
case], the acts of foreign sovereigns taken within their own
jurisdictions shall be deemed valid,” id. at 409.
World Wide Minerals, 296 F.3d at 1164-65.
17
the contractual cause of action on which those judgments are
based is repugnant to District policy.
B
The district court struck the defendants’ second, third, and
fourth affirmative defenses as well as the first. Because the
defendants do not appeal the loss of their second defense, see
Appellants’ Br. 14 n.10, we address only the third and fourth.
The third affirmative defense states: “Lloyd’s does not
have standing to enforce the judgments” because “neither
Lloyd’s nor Equitas paid the duty required by English law upon
the transfer of the supposed R&R debt” from Equitas to Lloyd’s.
Am. Answer ¶¶ 91, 93. The defendants contend that any debts
they owed for nonpayment of reinsurance premiums were owed
to Equitas, not Lloyd’s. They further assert that, because the
transfer tax required to assign those debts to Lloyd’s has never
been paid, the assignment is invalid under English law and
Lloyd’s cannot enforce the judgments against them.
As the district court correctly noted, “this challenge to the
validity of the assignment comes too late and is made in the
wrong court.” Mem. Op. at 9 (Aug. 20, 2004). The English
judgments that Lloyd’s seeks to enforce were entered in Lloyd’s
own name as plaintiff, not in the name of Equitas. They order
the Siemon-Nettos to “pay the Plaintiff,” not to pay Equitas.
Society of Lloyd’s v. Gillian Mary Siemon-Netto, Judgment (J.A.
116); Society of Lloyd’s v. Uwe Siemon-Netto, Judgment (J.A.
119). Moreover, the English complaints on which those
judgments were entered expressly asserted that Equitas had
assigned its rights to the Siemon-Nettos’ premiums to Lloyd’s,
and that the premiums were “due and owing from the
Defendant[s] to Lloyd’s.” E.g., Society of Lloyd’s v. Gillian
Mary Siemon-Netto, Points of Claim ¶ 10 (J.A. 35). Proof of
18
that assignment was thus a part of Lloyd’s English cause of
action and, as we have noted, that cause of action is not
repugnant to the law of the District. Nor have the defendants
asserted anything about English principles of assignment of
claims that would make it so.
Finally, the defendants’ fourth affirmative defense merely
states that “the amount alleged by plaintiff as due and owing is
incorrect.” Am. Answer ¶ 96. The district court struck this
defense on the ground that it did “not even arguably fit into any
of the specific exceptions enumerated in the [Recognition Act]
and appear[ed], rather, to be an improper attempt to relitigate the
merits of the underlying claims.” Mem. Op. at 8-9 (Aug. 20,
2004). The court was obviously correct. The amount due and
owing was an element of Lloyd’s cause of action in contract,
and as there is nothing repugnant about that cause of action, the
fourth affirmative defense does not state a ground for failing to
recognize it.
In sum, we conclude that the district court committed no
error in striking any of the Siemon-Nettos’ affirmative defenses
under Federal Rule of Civil Procedure 12(f).
III
The defendants’ answer also asserts four counterclaims
against Lloyd’s: “negligent misrepresentation,” Countercls. ¶
152; “fraud,” id. ¶ 155; “consumer fraud,” id. ¶ 159; and “breach
of fiduciary duty,” id. ¶ 165. Each asserts, in haec verba, that
Lloyd’s failed to disclose and/or concealed “the extent of the
losses generated by the asbestos and environmental claims,”
“the financial condition of the syndicates,” and Lloyd’s
“accounting and financial controls for the syndicates.” Id. ¶¶
152, 155, 159, 165. The district court dismissed the
counterclaims on the ground that the Siemon-Nettos had agreed,
19
by contract, that only English courts could hear such claims.
See Mem. Op. at 10-15 (Aug. 20, 2004). We concur.
The General Undertaking, personally signed by each of the
Siemon-Nettos, contains the following forum selection clause:
Each party hereto irrevocably agrees that the courts of
England shall have exclusive jurisdiction to settle any
dispute and/or controversy of whatsoever nature arising
out of or relating to the Member’s membership of,
and/or underwriting of insurance business at, Lloyd’s
and that accordingly any suit, action or proceeding . .
. arising out of or relating to such matters shall be
brought in such courts . . . .”
General Undertaking § 2.2 (J.A. 25). Eight circuits have found
the clause enforceable, see supra note 1 (citing cases), and the
defendants do not contest its validity here, see Appellant’s Br.
26.
The forum selection clause provides that the English courts
shall have exclusive jurisdiction over any dispute “of
whatsoever nature arising out of or relating to the Member’s
membership of, and/or underwriting of insurance business at,
Lloyd’s.” We perceive no room for doubt that the defendants’
misrepresentation, fraud, consumer fraud, and breach of
fiduciary duty counterclaims all fall well within those confines.10
10
See, e.g., Haynsworth, 121 F.3d at 961, 970 (dismissing, on the
basis of the forum selection clause, suits against Lloyd’s by Names
alleging fraud, breach of fiduciary duty, and violations of the Texas
consumer fraud statute); Bonny, 3 F.3d at 157, 159 (same for suits
alleging, inter alia, fraud, negligence, and breach of duty); Roby, 996
F.2d at 1358, 1366 (same for suits alleging violations of federal
securities and racketeering laws).
20
As the district court noted, the “Siemon-Nettos’ central claim
[is] that they would not have become Names or renewed their
memberships if they had known the truth about Lloyd’s losses.”
Mem. Op. at 11 (Aug. 20, 2004). Indeed, at oral argument, the
defendants conceded that their counterclaims are compulsory
under the Federal Rules, see Oral Arg. Tr. at 15-16, which by
definition means that they “arise[] out of the transaction or
occurrence that is the subject matter of the opposing party’s
claim,” FED. R. CIV. P. 13(a). The subject matter of that claim
is the debt owed by the defendants arising out of their
membership in, and underwriting of insurance business at,
Lloyd’s.
The defendants seek to avoid the effect of the General
Undertaking’s forum selection clause by contending that their
counterclaims do not relate to their membership in Lloyd’s, but
rather to “Lloyd’s handling of” the Lloyd’s American Trust
Funds (LATF) -- the funds into which all insurance premiums
paid in U.S. dollars are deposited. Appellant’s Br. 25. But that
is simply not the case. Each of the counterclaims expressly
“repeat[s] and reallege[s],” Countercls. ¶¶ 151, 154, 157, 164,
the allegation of the defendants’ second affirmative defense that:
“Defendants would not have become Names and would not have
renewed their memberships if they had known about the losses
attributable to asbestos claims, the financial condition of the
syndicates, or the lack of proper accounting and financial
controls for the syndicates.” Id. ¶ 85 (emphasis added).
In support of their contention that this case should be
governed by the LATF deed, rather than the General
Undertaking,11 the defendants cite In re Lloyd’s American Trust
11
The LATF deed contains a choice of law clause (providing that
disputes shall be governed by New York law), but does not contain a
forum selection clause.
21
Fund Litigation, 954 F. Supp 656 (S.D.N.Y. 1997). That case
involved claims brought by Names against Citibank, the trustee
of the LATF. There, the court denied Citibank’s motion to
dismiss the case based on the forum selection clause of the
General Undertaking. The court held that, because Citibank was
neither a party to the General Undertaking nor “closely related”
to one, it could not rely upon the clause. 954 F. Supp. at 670.
But as the district court in this case correctly noted, unlike
Citibank, Lloyd’s “is more than ‘closely related’ to a signatory
to the [General Undertaking] -- it is itself a signatory.” Mem.
Op. at 12 (Aug. 20, 2004). Accordingly, “it may invoke the
forum selection clause to insist upon litigation in the United
Kingdom.” Id.
IV
At oral argument, counsel for the defendants made clear
that the underlying basis of their defense is their belief that the
English courts are biased in favor of Lloyd’s: that is, that those
courts have a “bias and prejudice in favor of Lloyd’s under
circumstances which make it impossible for a Name to win.”
Oral Arg. Tr. at 7. The Recognition Act includes an exception
for this kind of defense to a foreign judgment, but it requires
proof that the “judgment was rendered under a system that does
not provide impartial tribunals or procedures compatible with
the requirements of due process of law.” D.C. Code § 15-
383(a)(1).
The defendants do not assert that English courts fall within
that category and could not prove it if they did.12 Indeed, the
12
See Ashenden, 233 F.3d at 476 (“Any suggestion that [the
English] system of courts does not provide impartial tribunals or
procedures compatible with the requirements of due process of law
borders on the risible.” (internal quotation marks omitted));
22
Siemon-Nettos’ only evidence of the English courts’ asserted
“bias and prejudice” is that other Names in their position --
whose arguments they believe had merit -- lost their cases in
those courts. But the fact that the Names’ arguments did not
prevail hardly establishes the partiality of the courts that heard
them. Indeed, if it did, the fact that Names have lost similar
(albeit not identical) cases in eight United States Courts of
Appeals, see supra note 1, would require us to reach the same
conclusion regarding American courts.
The judgment of the district court is
affirmed.
Haynsworth, 121 F.3d at 967 (noting that England is “a forum that
American courts repeatedly have recognized to be fair and impartial”);
Riley v. Kingsley Underwriting Agencies, Ltd., 969 F.2d 953, 958
(10th Cir. 1992) (holding that “the courts of England are fair and
neutral forums”); British Midland Airways Ltd. v. Int’l Travel, Inc.,
497 F.2d 869, 871 (9th Cir. 1974) (“United States courts which have
inherited major portions of their judicial traditions and procedure from
the United Kingdom are hardly in a position to call the Queen’s Bench
a kangaroo court.”).